Consumer Prices Post Biggest Rise in Nearly Four Years
Feb 17 2017
Consumer prices hit their highest level in two and a half years in January, with rising fuel costs pushing inflation higher.
Inflation rose to 1.8%, the highest since June 2014, from 1.6% in December, data from the Office for National Statistics showed Tuesday.
USA consumer prices in January rose at their fastest pace in almost four years, a fresh sign that a pickup in inflation may be approaching, Labor Department figures showed Wednesday.
The 0.6 percent rise in January (actually 0.5506 percent if we want to be precise) was driven by a 4.0 percent jump in energy prices.
Rising petrol prices contributed half of the increase as fuel prices rose by 7.8 per cent. Petrol prices have soared after the Organisation of the Petroleum Exporting Nations (Opec) cut production in November.
But mounting price pressures in China and many other countries have sparked talk of tighter monetary policy this year, after years of super-loose settings aimed at reviving economic growth.
The food index, which had been unchanged for 6 consecutive months, increased 0.1 percent.
Higher costs for gasoline costs helped fuel a rise in US wholesale prices in January, but overall inflation still appears to be in check.
The consumer-price index showed headline inflation accelerated to 2.5% in the 12 months ended in January, a much faster pace than economists had expected. Health care costs rose 0.2%.
But it is still well within the government's comfort zone of 3 percent, and is showing few signs yet that the jump in producer prices is filtering through to the broader economy, analysts say.
At the same time, deflationary pressures from food prices have slowed down, supporting near-term projections by the central bank that inflation will continue to rise over the first quarter of this year, first reaching and then likely surpassing the target of 2 percent for the period. The figure also matched preliminary report.
It had been falling for more than two years amid a supermarket price war, but this now appears to be grinding to a halt.
"This will squeeze real earnings growth to close to 0%, unless wages rises by more than we expect".
January was also considerably stronger than the same month past year, with sales up 5.6 percent by that measure. This pushed up import costs, which in turn boosted consumer prices and caused inflation to increase. Potato prices recorded sharp fall at (-) 0.20 percent, from 26.42 percent in the previous month.